Category Farm definition

There are lots of ways to grow crops and livestock.  There are farms that are very profitable and farms that are more of a heritage or lifestyle than a business.  Why does it matter if we are all talking about the same kind of farm.

In the paper, US Farms Define the American Dream, I wrote as an example for my agribusiness students I identify a US farm as 1) a business, 2) a lifestyle, and 3) a sacred institution.

Of course, they can be all three.  But it gets a bit dicey in public policy work (laws, regulations, and support programs) if the object of the policy, US farms, has no uniformity to it at all.

A commonly used definition of a farm is the one referred to in the above paper found in the Appendix of the USDA Census of Agriculture,“any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year.”

Essentially, if you produce goods or services that have a value of $1,000 per year, USDA will likely identify your operation as a farm.  The smallest category in the June 18 post was $350,000 of gross cash farm income.  There is a large jump between $1,000 per year and $350,000 per year.

The USDA took over administration of the Census of Agriculture from The Commerce Department about 20 years ago, because the Census Bureau of the US Department of Commerce, announced they would raise the definition of a US farm from $1,000 per year to $10,000 per year.  With that proposed change, most of the US farms would disappear.  The policy support for small farms became very clear.  So USDA took over the administration of the Census of Agriculture.

I had the privilege of sitting on USDA’s agricultural statistics advisory committee for nearly 10 years (half with the Dept. of Commerce and half with the Dept. of Agriculture).

Legal definitions of business entities, like farms, determine who gets counted and who does not.

What is a farm?  This question is similar to defining, ‘what is rich?’  Everyone asked will have a different answer.

About 20 years ago, the USDA, Economic Research Service (ERS) began providing US farms in a hierarchy of farm typology.  It was not the first hierarchy explored by ERS, but this overlay of farm categories is intuitively informative.  The farm typology is merely a filter through which roughly 2 million US farms are sorted.  The best place to begin is with this chart:

The first take home from this chart is that 90 percent of the 2 million US farms counted by USDA are identified as small.

What is small in this case?  ERS defines small as less than $350,000 in annual gross cash farm income, or revenues before expenses.   If a farm brings in $325,000 in revenue, but has $300,000 in expenses, their gross income (before taxes) would be $25,000.

If farm revenue is $325,000 gross cash farm income and their expenses are $350,000, then their annual profit is -$25,000.  This sort of outcome is far too common in farming.

So, 90 percent of US farms, 1.8 million of the 2 million farms, are identified as small.  These small farms produce 21 percent of the farm output, or production.  This means that the other 10 percent of farms, 200,000 farms produce 79 percent of the farm output or production.

What does this mean?

Only that it takes many different kinds of farms to deliver food, feed, fertilizer, fuel, and fiber that US farms produce.  The larger farms tend to produce for different markets than the smaller farms.  They all play a role.  Local food has been becoming increasingly important.  After COVID-19, the economic demand for local food is growing even faster.

The most important take-home message in this post is that a ‘farm’ in the US is not a uniform measure by which to build a support industry, such as agribusiness, around.  When considering farms in a global/international context, it gets even more difficult to evaluate a ‘farm’ as a unit of measure.

As we develop the definition of a farm in this space, we will see that it is much broader than the dollar-value of production in how a farm is defined.  As biomass production is considered, reliance on the definition of the US farm is very limiting.

Thanks for reading!